The first batch of Bank of America’s (BofA’s) principal reduction offers was sent out to 60,000 qualified borrowers in the U.S. this May. Borrowers at least 60 days behind on their mortgage payments were offered an average $150,000 cramdown. BofA is expected to make a total of 200,000 principal reduction offers by August.

These cramdown offers are part of BofA’s efforts to meet the terms of February’s $25 billion national industry settlement resulting from the epidemic of fraudulent home loan originations and subsequent foreclosures. BofA has remained closed-lipped as to the precise criteria for electing which lucky borrowers are given the offer.

It seems that 200,000 floundering homeowners are in store for an unexpected windfall. However, the response from borrowers so far has been nothing short of uncanny: eerie silence.

Over half of the qualified borrowers solicited have not responded to BofA’s cramdown offer, even though a cramdown is an economically viable option in light of foreboding foreclosures.

Many are speculating about the lack of enthusiasm from BofA’s borrowers. Theories range from previous unpleasant customer service experiences with BofA, to a simple case of borrower fatigue. Many homeowners behind on mortgage payments whose previous calls for assistance went unanswered may be fed up with the taxing process of seeking help, believing BofA’s offer is among a large list of other modification offers which never come to fruition, or shortsale strategies that are just too good to be true.

BofA also has a somewhat notorious reputation for losing paperwork and poor administration, leading to a sense of mistrust among their disgruntled borrowers.

first tuesday take

After looking at the fine print it’s clear that these leery and weary borrowers ought to seriously consider BofA’s offer. The money for this “gift,” although mandated by the settlement, is clean. It shows the government’s efforts are at least loosening the proverbial noose around borrowers’ necks and the only verification required is a proof of income – borrowers needn’t jump through a litany of bureaucratic hoops, which may be scaring off some.

This window of opportunity is rare considering BofA’s history. Rare might not be the appropriate term; we’ll go with antithetical. BofA was extremely reluctant to implement such a measure in order to help the very buyers they so alluringly coaxed into this mess. This window doesn’t open often, and brokers and agents should counsel their borrowers to consider every possibility of solvency at their disposal, this offer included.

Advise your eligible borrowers to keep their eyes and ears open for these little golden tickets to arrive in the mail. Every avenue for financial salvation should be considered, especially those resulting from a government-enforced settlement. Don’t refuse a gift-horse before you’ve even looked in its mouth.

5 Comments

David
on August 3, 2012 at 7:40 am

I have seen a couple of these in our law office. Specifically, on one, it was for the junior loan, a full forgiveness of the debt. On the surface, looks good right? Not so quick, even with forgiving the entire balance, the first was underwater by another 100k and the entire transaction was purchase money and the first was in foreclosure. In reality, the junior loan was already DOA, did not have any recourse and they were able to use the settlement money on a transaction they had already fully lost and they knew the borrower was walking away. What was also included in the letter was their lovely reference to providing the IRS with a 1099 for the forgiveness and reporting on the credit of the borrower of the forgiveness. This is pretty damn smart of them. They are using the settlement funds allocated to pay off loans they already lost on. These guys are smart as can be. This is not help for the consumer.

Cram downs are not the answer! It is unfair to reward irresponsible borrowers and punish those that have always behaved responsibly.
BofA will be a small drop in a bucket. Fannie/Freddie have just refused to take part, and rightfully so!

Finally, the great majority of the American people are awakening to the massive and almost inconceivable fraud that has been perpetrated upon them by the banking elite not only just since 2008, but for centuries!

A group of Swiss scientists have run a super-computer program to ascertain the ties between banks and corporations worldwide. What they came up with is truly startling–a tiny handful of corporations controls–by means of cross-ownership and control–a staggering 80% of all the world’s wealth.

And here is what is even more startling: The most powerful inner group of that small circle of controlling corporations are banks. And, it doesn’t end there. The controlling banks are all owners of the FED. Yes, the FED is NOT and never has been a government agency, but is a privately held corporation whose owners are the big banks.

Information is coming forth from a new book just out (authored by a government official who was there behind the closed doors in 2008) explaining how obsequiously Hank Paulson, Timothy Geithner, and other government officials bowed to the whims of the banking elite during the crisis and ended up serving THEIR needs, not the needs of the American people.

The LIBOR scandal is the shot across the bow. It will continue to expand, as local, state, and federal governments bring lawsuits against the criminal parasites (bankers) that have sucked the life blood of mankind for far too long.

The goal will be to break the back of the Banking Cartel and finally free us all from the immoral and criminal manipulations that it perpetrates.

it is important to remember that it wasn’t BofA that ‘alluringly coaxed’ buyers into this mess, it was Countrywide. Surely they regret that purchase, as do ALL BofA stockholders (myself included).

in the interest of accuracy it is important to recall that BofA has always been a tough place to get a loan…that’s why Countrywide was so easily able to grow so large so fast…they didn’t underwrite the loans and they rarely said no to even the shakiest borrowers.

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